DP AIRCRAFT I LIMITED

Transcription

1 YEAR ENDED 31 DECEMBER

2 CONTENTS 3 Summary 5 Fact Sheet 6 Highlights 7 Chairman s Statement 8 Asset Manager s Report 14 Directors 15 Directors Report 21 Report of the Audit Committee 24 Statement of Principal Risks and Uncertainties 26 Statement of Directors Responsibilities 27 Independent Auditor s Report to the members of DP Aircraft I Limited 29 Consolidated Statement of Comprehensive Income 30 Consolidated Statement of Financial Position 31 Consolidated Statement of Cash Flows 32 Consolidated Statement of Changes in Equity 33 Notes to the Consolidated Financial Statements 61 Company Information 63 Appendix 1 Alternative Investment Fund Managers Directive 2 Page

3 COMPANY OVERVIEW DP Aircraft I Limited (the Company ) was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law, 2008 on 5 July 2013 with registered number The Company was established to invest in aircraft. The Company is a holding company, and makes its investment in aircraft through four wholly owned subsidiary entities, DP Aircraft Guernsey I Limited, DP Aircraft Guernsey II Limited, DP Aircraft Guernsey III Limited and DP Aircraft Guernsey IV Limited (collectively and hereinafter, the Borrowers ), each being a Guernsey incorporated company limited by shares and two intermediate lessor companies, DP Aircraft Ireland Limited and DP Aircraft UK Limited (the Lessors ), an Irish incorporated private limited company and a UK incorporated private limited company respectively. The Company and its subsidiaries (the Borrowers and the Lessors) comprise the Group. Pursuant to the Company s Prospectus dated 27 September 2013, the Company offered 113,000,000 Ordinary Shares of no par value in the capital of the Company at an issue price of US$1.00 per Share by means of a Placing. The Company s Shares were admitted to trading on the Official List of the Channel Islands Securities Exchange and to trading on the Specialist Fund Market of the London Stock Exchange on 4 October As the ISA Regulations were amended last year so that shares traded on the Specialist Fund Market are now eligible in their own right for inclusion in an ISA, on 27 May, the Company delisted its Shares from the Official List of the Channel Islands Securities Exchange. On 5 June, the Company offered 96,333,333 Ordinary Shares (the New Shares ) of no par value in the capital of the Company at an issue price of US$ per Share by means of a Placing. The Company s New Shares were admitted to trading on the Specialist Fund Market of the London Stock Exchange on 12 June. In total there are 209,333,333 Ordinary Shares in issue with voting rights. INVESTMENT OBJECTIVE & POLICY The Company s investment objective is to obtain income and capital returns for its Shareholders by acquiring, leasing and then, when the Board considers it appropriate, selling aircraft (the Asset or Assets ). To pursue its investment objective, the Company intends to use the net proceeds of placings and other equity capital raisings, together with loans and borrowings facilities, to acquire aircraft which will be leased to one or more international airlines. THE BOARD The Board comprises independent non-executive directors. The directors of the Board are responsible for managing the business affairs of the Company in accordance with the Articles of Incorporation and have overall responsibility for the Company s activities, including portfolio and risk management while the asset management of the Group is undertaken by DS Aviation GmbH & Co. KG (the Asset Manager ). THE ASSET MANAGER The Asset Manager has undertaken to provide the asset management services to the Company under the terms of an asset management agreement but does not undertake any regulated activities for the purpose of the UK Financial Services and Markets Act Page

4 DISTRIBUTION POLICY The Company aims to provide Shareholders with an attractive total return comprising income, from distributions through the period of the Company s ownership of the Assets, and capital, upon any sale of the Assets. The Company targets a quarterly distribution in February, May, August and November of each year. The target distribution is US$ per share per quarter. Four quarterly dividends have been paid during the year ended 31 December and one has been paid subsequent to the year end, each meeting the US$ per share target. The target dividends are targets only and should not be treated as an assurance or guarantee of performance or a profit forecast. Investors should not place any reliance on such target dividends or assume that the Company will make any distributions at all. 4 Page

5 FACT SHEET Ticker DPA Company Number ISIN Number GG00BBP6HP33 SEDOL Number BBP6HP3 Traded Specialist Fund Market ( SFM ) of the London Stock Exchange SFM Admission Date 4-Oct-13 Share Price US$ at 31 December Earnings per share US$ for the year ended 31 December Country of Incorporation Guernsey Current Shares in Issue 209,333,333 Administrator and Company Secretary Fidante Partners (Guernsey) Limited (formerly Dexion Capital (Guernsey) Limited) Asset Manager DS Aviation GmbH & Co. KG Auditor and Reporting Accountant KPMG, Chartered Accountants Corporate Broker Canaccord Genuity Limited Aircraft Registration EI-LNA (re-registered to LN-LNA on 10 February 2016) LN-LNB HS-TQD HS-TQC Aircraft Serial Number Aircraft Type and Model B787-8 Lessees Norwegian Air Shuttle ASA Thai Airways International Public Company Limited Website 5 Page

6 HIGHLIGHTS PROFIT FOR THE YEAR Profit for the year ended 31 December is US$ 14,998,572 (Earnings per Share US$ per Share) (period from 5 July 2013 to 31 December 2014 US$ 10,195,726 (Earnings per Share US$ per Share)). NET ASSET VALUE ( NAV ) The NAV was US$ per Share at 31 December (2014: US$ ). Although the fair values of the derivatives will move over their terms, at maturity the derivatives will reduce to nil. As at 31 December As at 31 December 2014 US$ per share US$ per share NAV including swap liabilities NAV excluding swap liabilities DIVIDENDS Dividends were declared on: Date Dividend reference period Dividend per Share Payment date 20 January Quarter ended 31 December 2014 US$ per Share 13 February 20 April Quarter ended 31 March US$ per Share 18 May 17 July Quarter ended 30 June US$ per Share 14 August 21 October Quarter ended 30 September US$ per Share 13 November 20 January 2016 Quarter ended 31 December US$ per Share 12 February 2016 OFFICIAL LISTING The Company s Shares were first admitted to trading on the Official List of the Channel Islands Securities Exchange and to trading on the Specialist Fund Market of the London Stock Exchange on 4 October The Company s Shares were delisted from the Official List of the Channel Islands Securities Exchange on 27 May. PLACING OF SHARES On 12 June, 96,333,333 Shares were issued at a price of US$ per Share pursuant to a Placing Agreement, dated 5 June, between the Company, DS Aviation, JS Holdings GmbH & Co. KG (DS Aviation and JS Holdings together the Asset Manager Parties ) and Canaccord Genuity (the Company s Corporate Broker) whereby Canaccord Genuity acted as agent for the Company, to procure subscribers for Shares under the Placing of Shares at the Issue Price (the Placing ). The Placing raised gross proceeds of US$ 102m. ACQUISITION OF AIRCRAFT Two additional aircraft were purchased on 18 June with the equity from the Placing and from new borrowings. The two aircraft are leased to Thai Airways International Public Company Limited ( Thai Airways ). 6 Page

7 CHAIRMAN S STATEMENT I am pleased to present Shareholders with the Annual Report and Financial Statements for the year ended 31 December. The key highlight for the Company was the issue of 96,333,333 Ordinary Shares (the 'New Shares') of no par value in the capital of the Company at an issue price of US$ per Share by means of a Placing. The Company's New Shares were admitted to trading on the Specialist Fund Market of the London Stock Exchange on 12 June and facilitated the purchase of two further Boeing aircraft which were leased to Thai Airways. DP Aircraft I Limited took over the title to the aircraft HS-TQC and HS-TQD. There are no issues to bring to the attention of Shareholders concerning the performance of either of the Lessees and the Company is performing very much as expected. The Total Shareholder Return for the accounting period under review was US$ per Share (2014: US$ per Share). The Company continued to meet its target dividends of US$ per Share for the quarter s ending April, July and October. A fourth interim dividend was declared on 20 January 2016 and paid on 12 February The Net Asset Value per Share as at 31 December was US$ per share (2014: U$ per share). The outlook is described fully in the Asset Manager s Report that follows on page 8 of this report. The Asset Manager will advise the Directors of any further acquisition opportunities as they arise. The Company s second annual general meeting ( AGM ) is scheduled for July On 21 January 2016 we announced with great sadness the death of Didier Benaroya, a non-executive director of the Company. Didier's knowledge and experience of the aviation sector, as well as his pragmatism and good humour, were highly valued by all of us who worked with him. Didier is and will continue to be greatly missed. Following the sad loss of Didier Benaroya we have embarked on a search for a suitable replacement. We are making excellent progress with a new appointment and expect to make an announcement on or around 1 May MSN was deregistered from the Irish registry (EI-LNB) and subsequently re-registered on the Norwegian registry (LN-LNB) on 29 May. MSN was deregistered from the Irish registry (EI-LNA) and subsequently re-registered on the Norwegian registry (LN-LNA) on 10 February Jon Bridel Chairman 19 April Page

8 ASSET MANAGER S REPORT Overview and Development The Aviation Market proved to be a successful year in the airline market. In December, the International Air Transport Association (IATA) raised its outlook for global airline profits for from US$ 29.3 billion to US$ 33.0 billion. In October, air traffic measured in Revenue Passenger Kilometres (RPK) of airlines in the Asia-Pacific region increased by 8.6 per cent and the load factor was up 1.5 percentage points compared to the same month in Although trade activity to and from Asia decreased and the growth of the Chinese economy was behind expectations, it seems that these factors have not impacted passenger demand for air transportation. Passenger traffic in Europe saw 6.7 per cent growth, with the passenger load factor increasing by 1.9 percentage points to 83.8 per cent, which is the highest among the geographic regions. As the majority of European large carriers are hedging most of their fuel demand, the positive effect of low crude oil prices has been delayed into In the first ten months of, compared to the same period in the previous year, global capacity measured in Available Seat Kilometres (ASK) grew by 6.0 per cent whereas global traffic increased by 6.8 per cent. This resulted in a global average load factor of 80.7 per cent. Although crude oil prices have dropped markedly, there has been a delay in airlines enjoying the benefits of that fall as a result of pre-existing hedging contracts. On top of that, the strength of the US-dollar and the associated exchange rate effects have tempered the gains from lower oil prices. As future oil prices (as well as the market trend) remain uncertain and the business environment stays competitive, the demand for aircraft benefitting from the latest technology, such as the Dreamliner Boeing 787 and the Airbus A350, is expected to stay strong. The aircraft manufacturers Airbus and Boeing expect air travel to grow by an average of 4.6 per cent and 4.9 per cent respectively within the next 20 years according to their Global Market Forecast (Airbus) and Current Market Outlook (Boeing) for the period spanning to Airbus assumes that the growth in air traffic will result in demand for 32,600 aircraft worth US$ 4.7 trillion during that period; while Boeing expects deliveries of 38,050 aircraft worth US$ 5.6 trillion in the next 20 years. With both manufacturers predicting that more than 13,000 aircraft will be retired due to lower fuel efficiency or older technology, the global passenger and freighter aircraft fleets would, on their forecasts, double in size to 38,500 and 43,560 aircraft respectively by For 2016, IATA expects a modest improvement in global economic activity which it is assumed will have a positive effect on air transport demand and airlines` profits. The organisation is of the opinion that emerging markets will continue to see a slow-down in growth in the short term, but remain robust over the medium term. Both the European and North American economies are expected to improve in 2016, and global airline profits are therefore expected to grow further to US$ 36.3 billion. Air travel is forecast to grow by 6.9 per cent over the year, which would be the strongest growth since 2010 and would raise passenger numbers up to 3.8 billion. The number of destinations, as well as the frequency of flights, are expected to grow by 2.2 per cent, while tourist travel alone is expected to account for around US$ 634 billion of spending for air transportation and its services in The Assets Four Boeing Dreamliner B787-8s By the end of December, 1,142 Dreamliner Boeing 787 had been ordered and 363 Boeing 787 aircraft delivered to 35 different customers. The number of deliveries includes 289 aircraft of the B787-8 variant, whereas the current backlog of all three different B787 types counts for 779 aircraft. In, six of the 35 customers received their first B787 aircraft, amongst others American Airlines, Korean Air and Privatair. 8 Page

9 ASSET MANAGER S REPORT (CONTINUED) The Assets Four Boeing Dreamliner B787-8s (continued) The B787 is a favoured aircraft which is operated on all continents across different climatic conditions and by airlines with different business models. Thai Airways decision to select the B787 and make it an important part of its fleet strategy is reflected in the statement by Thai s acting president Siwakiat Jayema that The Dreamliner is a perfect fit for THAI in terms of its range, size and fuel efficiency. The CEO of Ethiopian Airlines, Tewolde Gebremariam, said of the Dreamliner that passengers love it and whenever we introduce the Dreamliner on a route then our load factor improves. These testimonials underline the high level of operator and customer satisfaction for this aircraft. Since 2011, 10 per cent of new routes operated by wide-bodies have been launched with B787 aircraft. The B787-8 in particular has been used as a market opener and, due to its efficiency and capability, can be operated economically between hubs and secondary markets. According to Boeing, airlines from the Asia-Pacific region will have especially high demand for small and medium wide-body aircraft. It seems obvious that the Dreamliner B787 will remain a sought-after aircraft. Since DP Aircraft I Limited took title of the two aircraft LNA and LNB in 2013, Norwegian has met all of its obligations in full. The carrier s B787 fleet offers a total of 291 seats in premium economy and economy class. The airline deploys its Dreamliner fleet out of Scandinavia and the UK both to Bangkok and to destinations in the US such as Orlando and Los Angeles, as well as to Caribbean destinations like Puerto Rico and St. Croix. In November, both aircraft LNA and LNB were inspected by DS Skytech at the Boeing maintenance facilities at Copenhagen International Airport. This inspection took place during overnight checks and included a review of the technical records. Both aircraft and their technical records were found to be in good condition with no significant defects or airworthiness related issues. Thai Airways equipped its B787 fleet with a total of 264 seats in business and economy class. The carrier operates this aircraft type on routes within the Asia-Pacific region such as Kuala Lumpur, Singapore and Denpasar, as well as to and from destinations in Australia such as Brisbane and Perth. Both aircraft, TQC and TQD, were inspected by DS Skytech Limited on the 8th and 9th July at Bangkok International Airport. The inspection found the aircraft to be in good condition with no significant defects or airworthiness related issues and the records are being maintained to an acceptable standard. Since DP Aircraft I Limited took title of both TQC and TQD, Thai Airways has met all of its lease obligations in full. The two charts below give a short overview of the utilisation of airframe and engines of each of the four Aircraft: AIRFRAME STATUS Norwegian Air Shuttle (31 st December ) EI-LNA LN-LNB TOTAL December TOTAL December Flight Hours 10, , Cycles 1, , Average Monthly Utilisation hours hours cycles 52.1 cycles Flight Hours/Cycles Ratio 8.19 : : : : 1 ENGINE DATA (31 st December ) Engine Serial Number Engine Manufacturer Rolls-Royce Rolls-Royce Rolls-Royce Rolls-Royce Engine Type and Model Trent 1000 Trent 1000 Trent 1000 Trent 1000 Total Time [Flight Hours] 8, , , ,984.4 Total Cycles 1, Location LNA LNF LNA LNB 9 Page

10 ASSET MANAGER S REPORT (CONTINUED) The Assets Four Boeing Dreamliner B787-8s (continued) AIRFRAME STATUS Thai Airways International (31 st December ) HS-TQC HS-TQD TOTAL December TOTAL December Flight Hours 4, Cycles 1, , Average Monthly Utilisation hours hours cycles 83.1 cycles Flight Hours/Cycles Ratio 3.69 : : : : 1 ENGINE DATA (31 st December ) Engine Serial Number Engine Manufacturer Rolls-Royce Rolls-Royce Rolls-Royce Rolls-Royce Engine Type and Model Trent 1000 Trent 1000 Trent 1000 Trent 1000 Total Time [Flight Hours] 4, , Total Cycles 1,291 1,291 1,109 1,109 Location TQC TQC TQD TQD The Lessees Norwegian Air Shuttle ASA Norwegian Air Shuttle transported 25.7 million passengers in, which represents a growth in number of 2 million passengers compared to The airline received eleven new aircraft during the course of last year, and the majority of newly-launched routes were long-haul destinations. The load factor increased by 5 percentage points to 86 per cent in. The airline is the third largest carrier by passenger numbers operating out of London-Gatwick where ten aircraft (as well as 130 pilots and 300 cabin crew members) are based. In addition to receiving several awards which highlighted the airline s convincing performance, Norwegian Air Shuttle was named the most fuel-efficient airline on transatlantic routes by a study of the ICCT (International Council on Clean Transportation); for the purposes of that award, the top 20 airlines on transatlantic routes were compared on their relative fuel efficiency and the associated carbon footprint. Furthermore, Norwegian is the first airline to offer live TV on board European flights. Norwegian s third quarter results state operating revenues of NOK 7,277 million (US$ 860 million). This is an increase of 15 per cent compared to the same quarter in the previous year. ASKs and RPKs increased by 2 per cent and 9 per cent respectively. The passenger load factor therefore rose to 91 per cent. Operating profits increased by 122 per cent to NOK 1,182 million (US$ 140 million). EBT amounted to NOK 1,098 million (US$ 130 million), which represented an increase of 117 per cent on the third quarter The carrier s net profits improved by 123 per cent to NOK 833 million (US$ 98 million) and the net profit margin increased to 11.4 per cent. Unit costs increased by 2 per cent whereas unit revenue increased by 13 per cent. Moreover, ancillary revenues grew by 3 per cent. Cash and cash equivalents as at 30th September counted for NOK 2,297 million (US$ 271 million). Norwegian transported 7.7 million passengers during the third quarter, a gain of 9 per cent. The strongest growth in passenger numbers was recorded at London Gatwick. 10 Page

11 ASSET MANAGER S REPORT (CONTINUED) The Lessees (continued) Norwegian Air Shuttle ASA (continued) Traffic figures for December showed an increase in ASK of 12 per cent and in RPK of 15 per cent compared to the same month in the previous year. The load factor therefore improved by 2 percentage points to 83.3 per cent. In the same period, passenger numbers grew by 9 per cent. The yield remained stable whereas the Revenue per Available Seat Kilometre (RASK) increased by 2 per cent. As at 30th September, Norwegian operated 434 scheduled routes to 130 destinations in 31 countries and had a fleet of 105 aircraft. Apart from the already announced new routes from Europe to Boston, in December Norwegian disclosed its plans to open a route between Oakland and London Gatwick in May of this year. In January 2016, Norwegian announced that it had made a deal with a number of tour operators, such as TUI. This renewal of partnerships is worth GBP 40 million and comprises flights from the UK and Scandinavia to destinations mainly around the Mediterranean Sea. Norwegian currently operates eight Boeing 787-8s. Last year the airline announced plans to further increase the long-haul fleet. Amongst some orders via lease deals, the carrier placed an order for 19 B787-9s, with options for ten further Dreamliners. This is the largest single order placed by a European airline. In 2016, the airline expects to receive another four B787s and by 2020 the Dreamliner fleet will comprise 38 aircraft from the B787 family. The mix of B787-8s and B787-9s will provide the airline with flexibility in regard to route planning and further long-haul commitment. Furthermore, the carrier has been granted both a UK AOC (Air Operator s Certificate) and an Operating License. This is an essential step towards further growth as it offers the airline the opportunity to extend its network to Africa, South America and Asia. The fourth quarter results were due to be published in mid-february. However, Bjørn Kjos, CEO of Norwegian Air Shuttle, said that [the] long-haul operation has stabilised and contributed significantly to the figures. It bodes well going forward, as it increases [Norwegian s] global competitiveness and positions [the carrier] for further growth at London Gatwick. In 2016, Norwegian expects to receive four leased B787-9s and intends to increase capacity in the long-haul market by 40 per cent. Thai Airways International The flag carrier Thai Airways International Public Company Limited is a full-service network carrier with 55 years of operational experience. The carrier is market-listed and majority-owned by the Thai Government (51.03 per cent). In, around 18.5 million passengers flew with Thai (including Thai Smile, a fully owned subsidiary of Thai Airways), with the average passenger load factor increasing by 4 percentage points. The carrier (including its subsidiary) currently offers flights from Bangkok to 70 destinations in 60 countries. As at 30th September, Thai s fleet (including Thai Smile) was 95 aircraft in size. Thai itself operates mainly wide-body aircraft from both Airbus and Boeing, whereas Thai Smile operates narrow-body Airbus A320s. Thai Airways has six B787-8s in operation and two more B787-9s on order as part of its fleet renewal plan. Due to the restructuring, the third quarter results for were heavily impacted by special items such as impairment charges arising in connection with the sale of older and less fuel-efficient aircraft to reduce operating costs and to become more competitive in the long term. In addition, the third quarter results were impacted by losses on foreign exchange, mainly attributable to the strong US dollar. Only 7 per cent of the carrier s revenues were received in US dollars, while in contrast 53 per cent of its expenses were incurred in that currency. According to Thai, the results were additionally stressed by the attack in Ratchaprasong in downtown Bangkok, after which air travel on key routes such as to China, Japan, Hong Kong, South Korea and Singapore decreased by around 15 to 20 per cent in the short term. For the third quarter of, Thai Airways showed a THB 8, Page

12 ASSET MANAGER S REPORT (CONTINUED) The Lessees (continued) Thai Airways International (continued) million (US$ 244 million) loss before tax compared to a THB 922 million (US$ 25 million) gain in the same quarter of The carrier posted a net loss of THB 9,894 million (US$ 272 million). Thai s operational results show a positive trend. Losses before tax decreased by 19.0 per cent and total expenses decreased by 6.1 per cent compared to the same quarter in the previous year. Capacity had been slightly reduced by 0.8 per cent, while passenger traffic increased by 3.9 per cent and the overall number of passengers went up by 8.8 per cent. This resulted in a 3.4 percentage point increase in the load factor. Passenger revenues remained unchanged. Yields suffer from lower fuel surcharges on the air fare and intense competition. While passengers in a highly competitive market profit from lower oil prices relatively quickly, carriers such as Thai, who hedge out a large proportion of their fuel consumption, profit much later from decreasing oil prices as they have to wait for their fuel hedges to fall away. According to the unaudited consolidated financial statement, cash and cash equivalents as at 30th September were THB 28,251 million (US$ 776 million). The nine month performance of seems to provide proof that the measures introduced by the restructuring plan are beginning to have an effect. The operational loss before tax decreased by 72 per cent from the same period in the previous year - after an operational loss before tax of THB 16,224 million (US$ 501 million) in the first nine months of 2014, the carrier stated an operational loss before tax of THB 4,536 million (US$ 125 million) for the same period in. Even though total revenues decreased by 1.4 per cent, passenger revenues increased slightly by 0.6 per cent. Total expenses decreased by 8.9 per cent whereas non-fuel related costs remained stable. ASK and RPK grew by 1.9 per cent and 9.1 per cent respectively. As a result, the load factor improved by 4.8 percentage points and the number of carried passengers increased by 15 per cent. Last but not least, internet sales as part of the transformation plan s commercial strategy were up on the previous year. By 30th September, Thai had successfully issued a THB 8,000 million (US$ 220 million) unsubordinated and unsecured debenture. The four tranches vary in size and maturities and the fixed coupon rates range between 3.46 and 4.74 per cent. The debentures were placed with both institutional investors as well as high net worth individuals. In December, after the ICAO (International Civil Aviation Organisation) had previously announced concerns regarding Thailand s civil aviation authority, the FAA (Federal Aviation Administration) downgraded the country of Thailand to category 2. This prevented Thai Airways from adding new US destinations either through its own operations or through code sharing; existing destinations and codeshare agreements were however untouched. Thai s decision to cancel flights to Los Angeles at the beginning of the winter schedule was not a result of the downgrade, but rather represented part of its network rationalisation and transformation plan, as Thai would have been permitted by the FAA to continue these flights. In contrast, Thai Airways was the first carrier outside the EU to pass the TCO (Third Country Operator) Audit by the EASA (European Aviation Safety Agency) which will become a requirement for all non EU-based carriers as of November 2016 if they wish to undertake operations to, from or within Europe. This supports the high safety standards which Thai Airways has sought to maintain, as the main concern of the ICAO and FAA is not particularly carrier related but applies instead to the civil aviation authority in the case of Thailand, for example, the approval of AOCs for new operators, as well as the authority s understaffing, were concerns. Thai Airways is on track with its transformation plan. This two year restructuring programme, which comprises six strategies and 21 project charters designed to turn the carrier into profitability, follows three steps: to stop losses, to rebuild Thai s strength and to grow sustainably. Some of the recent measures have included the postponement of the delivery of 14 aircraft which had been scheduled for between 2016 and In addition, the company completed the identification of unused or underutilised property, as a result of which Thai now 12 Page

13 ASSET MANAGER S REPORT (CONTINUED) The Lessees (continued) Thai Airways International (continued) plans to offer 19 properties including residences, land and office buildings for sale. In 2016 Thai also intends to complete the transition of the A320 narrow-body operations to its subsidiary Thai Smile whose cost structure is lower and allows for a more favourable position in a highly competitive domestic and regional market. Thai Airways therefore continues to pursue its objective of returning to profitability in DS Aviation GmbH & Co. KG Member of Dr. Peters Group Stockholmer Allee Dortmund, Germany 13 Page

14 DIRECTORS Jonathan (Jon) Bridel, Non- Executive Chairman (51) Jon is a Guernsey resident and is currently a non-executive Director of Alcentra European Floating Rate Income Fund Limited, Starwood European Real Estate Finance Limited, The Renewables Infrastructure Group Limited, Sequoia Economic Infrastructure Income Fund Limited and Funding Circle SME Income Fund Limited which are listed on the Main Market of the London Stock Exchange. Other companies include Fair Oaks Income Fund Limited. Jon was previously Managing Director of Royal Bank of Canada s investment businesses in the Channel Islands and served as a Director on other RBC companies including RBC Regent Fund Managers Limited. Prior to joining RBC, Jon served in a number of senior management positions in banking, specialising in credit and corporate finance and private businesses as Chief Financial Officer in London, Australia and Guernsey having previously worked at Price Waterhouse Corporate Finance in London. Jon graduated from the University of Durham with a degree of Master of Business Administration, holds qualifications from the Institute of Chartered Accountants in England and Wales (1987) where he is a Fellow, the Chartered Institute of Marketing and the Australian Institute of Company Directors. Jon is a Chartered Marketer and a member of the Chartered Institute of Marketing and the Institute of Directors and a Chartered Fellow of the Chartered Institute for Securities and Investment. Jeremy Thompson, Non- Executive Director (60) Jeremy Thompson is a Guernsey resident with sector experience in Finance, Telecoms, Aerospace and Oil & Gas. He acts as a consultant to a number of businesses which include independent non-executive directorships for three PE funds and to an Investment Manager serving the listed NextEnergy Solar Fund Limited. Between 2005 and 2009 he was a director of multiple businesses within a London based private equity group. This entailed board positions on both private, listed and SPV companies and highly successful exits. Prior to that he was CEO of four autonomous global businesses within Cable & Wireless PLC and earlier held CEO roles within the Dowty Group. Jeremy has studied and worked in the UK, USA and Germany. Jeremy currently serves as chairman of the States of Guernsey Renewable Energy Team and is a commissioner of the Alderney Gambling Control Commission. He is also an independent member of the Guernsey Tax Tribunal panel. Jeremy is a graduate of Brunel (B.Sc) and Cranfield (MBA) Universities and was an invited member to the UK s senior defence course (Royal College of Defence Studies). He holds the Institute of Directors (IoD) Certificate and Diploma in Company Direction and is an associate of the Chartered Institute of Arbitration. He is currently completing an M.Sc in Corporate Governance. Didier Benaroya, Non-Executive Director (65) Having previously worked as the founder and senior partner of the Transportation Group and the managing director or Paine Webber, Didier had extensive experience in the transportation industry. He was resident in the UK and was the founder and a director of Numera Limited and Numera Services Limited, which has advised investors, lessors, banks, operating lease companies and airlines on aircraft and airline related transactions (including leasing, financing and restructuring) since Didier held a BS in Economics, an MS in Mathematics and Applied Computer Science from the University of Paris, and an MBA from Northwestern University s Kellog School of Management. Didier sadly passed away on 21 January Page

15 DIRECTORS REPORT The Directors present their report and audited consolidated financial statements for DP Aircraft I Limited for the year ended 31 December. Principal Activity and Review of the Business The Company s principal activity is to purchase, lease and then sell Boeing Aircraft (the Assets ). The Company wholly owns six subsidiaries, DP Aircraft Guernsey I Limited, DP Aircraft Guernsey II Limited, DP Aircraft Guernsey III Limited, DP Aircraft Guernsey IV Limited, DP Ireland Aircraft Limited and DP Aircraft UK Limited (together the Group ). The investment objective of the Group is to obtain income and capital returns for the Company s shareholders by acquiring, leasing and then, when the Board considers it appropriate, selling the Assets. The Company has made its investments in the Assets through its subsidiaries. The Ordinary Shares of the Company are admitted to trading on the Specialist Fund Market of the London Stock Exchange. On 30 April, the Board of Directors of DP Aircraft I Limited announced that the Company was undertaking a placing of Ordinary Shares to finance the acquisition of two additional aircraft. The acquisition was funded through a combination of equity and debt. The two Boeing aircraft are leased to Thai Airways. Results and Dividends The profit for the year ended 31 December was US$ 15.00m (period from 5 July 2013 to 31 December 2014 US$ 10.20m). The Company aims to provide Shareholders with an attractive total return comprising income, from distributions through the period of the Company s ownership of the Assets, and capital, upon any sale of the Assets. The Company targets a quarterly distribution in February, May, August and November of each year. The target distribution is US$ per Share per quarter. Four quarterly dividends have been paid during the year ended 31 December. Subsequent to the year end a dividend has been paid on 12 February All the dividends paid to date have met the US$ per share target. The target dividends are targets only and should not be treated as an assurance or guarantee of performance or a profit forecast. The debt to equity ratio was 1.39 as at 31 December (2014: 1.38). Subsequent Events On 20 January 2016 the Company declared a quarterly dividend in respect of the quarter ended 31 December of US$ per ordinary share to holders of shares on the register at 29 January The ex-dividend date was 28 January 2016 with payment on 12 February Directors The Directors of the Company, who served during the year and to date are as shown below: Jonathan Bridel Jeremy Thompson Didier Benaroya (until 21 January 2016) The Board note with regret the death of Didier Benaroya on 21 January The Board expects to make an announcement on the appointment of a new non-executive Director on or around 1 May Page

16 DIRECTORS REPORT (CONTINUED) Directors interests The Directors interests in the shares of the Company as at 31 December are set out below and there have been no changes in such interests up to the current date: Number of ordinary shares 31 December Number of ordinary shares 31 December 2014 Jonathan Bridel 7,500 7,500 Jeremy Thompson 15,000 15,000 Didier Benaroya - - Principal Risks and Uncertainties The Statement of Principal Risks and Uncertainties are as described on page 24. Substantial Shareholdings The directors note the following substantial interests in the Company s share capital as at 31 December (10% or more shareholding): M&G Investment Management 46,849, % CCLA Investment Management 27,509, % As at the date of this report there have been no significant changes in the above list of substantial shareholdings. AIFM Directive In July 2013 the European Alternative Investment Fund Management Directive ( AIFMD ) came into effect with transitional provisions until July The Company has elected to be a self-managed Guernsey Alternative Investment Fund ( AIF ) and as such will be treated as a non-eu AIFM for the purposes of the Directive. The Company has registered with the Financial Conduct Authority (and notified the Guernsey Financial Services Commission) under the AIFMD (Marketing) Rules, The Board The Board comprises non-executive directors each of whom are independent. During the year ended 31 December, the Board had a breadth of experience relevant to the Company and a balance of skills experience and age. Following the sad loss of Mr Benaroya in January 2016, the Directors embarked on a search for a suitable replacement. The Board are making excellent progress with a new appointment and expect to make an announcement on or around 1 May The Board recognises the importance of diversity and will evaluate applicants to fill vacant positions regardless of gender and without prejudice. Applicants will be assessed on their broad range of skills, expertise and industry knowledge, and business and other expertise. In view of the long-term nature of the Company s investments, the Board believes that a stable board composition is fundamental to run the Company properly. The Board has not stipulated a maximum term of any directorship. As the Company is not a FTSE 350 company, Directors are currently not subject to annual election by the shareholders nor for the requirement for the external audit contract to be put out to tender every 10 years. The Directors will offer themselves for re-election at each annual general meeting ( AGM ). The Directors are on a termination notice of three months. 16 Page

17 DIRECTORS REPORT (CONTINUED) Directors Duties and Responsibilities The Board of Directors has overall responsibility for the Company s affairs and is responsible for the determination of the investment policy of the Company, resolving conflicts and for monitoring the overall portfolio of investments of the Company. To assist the Board in the day-to-day operations of the Company, arrangements have been put in place for the performance of certain of the day-to-day operations of the Company to third-party service providers, such as the Administrator and Company Secretary, under the supervision of the Board. The Board receives full details of the Company s assets, liabilities and other relevant information in advance of Board meetings. The Board undertakes an annual evaluation of its own performance and the performance of its audit committee and individual Directors, to ensure that they continue to act effectively and efficiently and to fulfil their respective duties, and to identify any training requirements. The results of the most recent evaluation have been reviewed by the Chairman and his fellow directors. No significant corporate governance issues arose from this review. The Board will also undertake an annual review of the effectiveness of the Company s system of internal controls and the safeguarding of shareholders investments and the Company s assets. At each quarterly meeting the Board will table and review a risk matrix. There is nothing to highlight from the reviews of these reports as at the date of this report. Jeremy Thompson was appointed as Senior Independent Director on 1 April Board Meetings The Board meets at least four times a year to consider the business and affairs of the Company for the previous quarter. Between these quarterly meetings the Board keeps in contact by and telephone as well as meeting to consider specific matters of a transactional nature. There is regular contact with the Secretary. The Directors are kept fully informed of investment and financial controls and other matters that are relevant to the business of the Company. The Directors also have access, where necessary in the furtherance of their duties, to professional advice at the expense of the Company. The Board considers agenda items laid out in the Notice and Agenda which are formally circulated to the Board in advance of any meeting as part of the board papers. Such items include but are not limited to; investment performance, share price performance, review of marketing and shareholder communication. The Directors may request any Agenda items to be added that they consider appropriate for Board discussion. In addition, each Director is required to inform the Board of any potential or actual conflict of interest prior to Board discussion. Board meetings are attended by representatives of the Asset Manager. The Company s corporate brokers also attend to assist the Directors in understanding the views of major shareholders about the Company. Directors Remuneration The remuneration of the non-executive directors is reviewed on an annual basis and compared with the level of remuneration for directorships of other similar funds. The board reviewed the current director fee levels (inclusive of all subsidiaries) and whilst it recognised there was a trend for increased fees over the past year it was decided to maintain total annual fees as the group currently stands for the next twelve months subject to current movements if any fees are not paid in Sterling. However, it was agreed to restructure and simplify the fees to better reflect the seniority, experience and responsibilities of the board with effect from 1 April On this basis, the revised base fee for the Chairman is 35,000 (previously 27,500) with the Audit Chairman receiving 25,000 ( 22,500) with a base director fee of 20,000 ( 20,000). The fees for all subsidiary positions including the leasing companies would be set at 5,000 each, reducing the total fee for subsidiaries by 10,000 per annum. 17 Page

18 DIRECTORS REPORT (CONTINUED) Directors Remuneration (continued) During the current year and prior period each Director received the following remuneration in the form of Director fees from Group companies: Year ended Period 5 July 2013 to 31 December 31 December 2014 US$ equivalent US$ equivalent Didier Benaroya 57,000 86,368 54,438 90,032 Jonathan Bridel (Chairman) 47,424 73,328 51,850 86,692 Jeremy Thompson (Audit Committee 42,424 65,614 44,438 74,302 Chairman) 146,848 US$ 225, ,726 US$ 251,026 There are no executive director service contracts in issue. Upon the requirement to issue a new prospectus at any time, the Directors will be entitled to receive an additional 5,000 each, per prospectus. The fees in respect of the prospectus issued in June are included in the table above. Internal Controls and Risk Management Review The Board is responsible for the Company s system of internal control and for reviewing its effectiveness. The Board confirms that there is an ongoing process for identifying, evaluating and monitoring the significant risks faced by the Company. The Board carries out an annual review of internal controls. The internal control systems are designed to meet the Company s particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss. Administration and Secretarial duties for the Company are performed by Fidante Partners (Guernsey) Limited (formerly Dexion Capital (Guernsey) Limited). The Directors of the Company clearly define the duties and responsibilities of their agents and advisors. The appointment of agents and advisers is conducted by the Board after consideration of the quality of the parties involved and the Board monitors their ongoing performance and contractual arrangements. Dialogue with Shareholders All holders of Shares in the Company have the right to receive notice of, and attend, all general meetings of the Company, during which the directors are available to discuss issues affecting the Company. The directors are available to enter into dialogue with shareholders and make themselves available for such purpose when reasonably required. The Company believes such communications to be important. Reports are provided to the Board of Directors on shareholders views about the Company and any issues or concerns they might have. Board Policy on Tenure and Independence The Board has not yet formed a policy on tenure however, it does consider the independence of each Director on an annual basis during the performance evaluation process. Auditor KPMG, Ireland, Chartered Accountants have indicated their willingness to continue in office. Accordingly a resolution proposing their reappointment will be submitted at the Company s next annual general meeting. 18 Page

19 DIRECTORS REPORT (CONTINUED) Going Concern The lease rental income has been set at an aggregate absolute income stream in excess of the Group s expenses, distributions and financing costs. The Directors are of the opinion that the affairs of the company are suitably structured to enable the Going Concern basis to be adopted in the preparation of these financial statements. Viability Statement The Financial Reporting Council s, UK Corporate Governance Code ( FRC ) requires boards to include a viability statement in the strategic report to investors. The viability statement is to provide an improved and broader assessment of long-term solvency and liquidity. It is expected that the statement will look forward significantly longer than 12 months and the Board has therefore deemed a three year period of review is appropriate. The Directors have therefore conducted a robust assessment of the viability of the Company over a three year period, taking account of the Company s current position and the potential impact of the principal risks outlined below. In making this statement, the Directors have considered the resilience of the Company, taking into account its current position, the principal risks facing the Company in severe but reasonable scenarios and the effectiveness of any mitigating actions. This assessment has considered the potential impacts of these risks on the business model, future performance, solvency and liquidity over the period. These factors were subjected to a review of different scenarios based on the key assumptions underlying the forecast. Where appropriate, this analysis was carried out to evaluate the potential impact of the Company s principal risks actually occurring, primarily non payment of leases or significant impairment of aircraft values. The Board of Directors have also considered the investment strategy of the Company and the disclosure made in the Prospectus issued during. The Directors continue to consider that an investment in the Company should be regarded as long term in nature and is suitable only for sophisticated investors, investment professionals, high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts and private clients (all of whom will invest through brokers), in each case, who can bear the economic risk of a substantial or entire loss of their investment and who can accept that there may be limited liquidity in the Shares. The Directors regularly review the timeliness of receipt of the aircraft rental income. The Directors consider quarterly consolidated management accounts that include cashflow required for dividend purposes and for the purposes of establishing suitable working capital requirements. The Directors consider that the Notes to the Financial Statements are integral to the support of the Viability Statement. Note 4 discloses the expected rental income up to and in excess of five years hence. Note 18 contains the expected liability flows and when netted off demonstrates significant net assets, prior to any future dividend declarations under normal circumstances. From the information provided to, and questions posed by the Directors, the Directors have concluded that there is a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December Annual General Meeting The Annual General Meeting of the Company will be held in Guernsey in July 2016 at 1 Le Truchot, St Peter Port Guernsey. The meeting will be held to receive the Annual Report and Financial Statements, re-elect Directors and propose the reappointment of the auditor and that the Directors be authorised to determine the auditor s remuneration. 19 Page

20 DIRECTORS REPORT (CONTINUED) Corporate Governance The Company is not required to comply with any particular corporate governance codes in the UK or Guernsey (since it is not authorised or regulated by the FCA or GFSC) but the Directors take corporate governance seriously and will have regard to relevant corporate governance standards in determining the Company s governance policies including without limitation in relation to corporate reporting, risk management and internal control procedures. The Directors intend to comply, and ensure that the Company complies, with any obligations under the Companies (Guernsey) Law, 2008 and the Articles to treat shareholders fairly as between themselves. Directors Share Dealings The Board has agreed to adopt and implement the Model Code for Directors dealings contained in the Listing Rules of the FCA (the Model Code ). The Board will be responsible for taking all proper and reasonable steps to ensure compliance with the Model Code by the Board. Board Committees The Board of Directors has established an audit committee, which operates under detailed terms of reference, copies of which are available on request from the Company Secretary. Alternative Investment Fund Managers Directive ( AIFMD ) For a non-eea AIFM that has over EUR100K (equivalent to US$ 109k at 31 December ) of net assets under management and also utilises leverage, certain Annual Investor Disclosures are required. For the purpose of AIFMD, the Company is a Self-Managed Alternative Investment Fund Manager with assets above the EUR100k (equivalent to US$ 109k at 31 December ), with leverage, threshold. AIFMD does not prescribe use of any one particular accounting standard however, the accounts must be audited by an auditor empowered by law to audit the accounts in accordance with the EU Statutory Audit Directive. The required disclosures for investors are contained within the Financial Conduct Authority checklist and the Company s compliance therewith can be found on page 63, Appendix 1 to these financial statements. By order of the Board Jon Bridel Director Jeremy Thompson Director 20 Page